Request for Disclosure of Information

Law firm “Collegia” has received an inquiry from one of the Belarusian banks relating to its client, in which the bank «in accordance with clause 1 of Article 8 of the Law of the Republic of Belarus «On counteraction of the legitimization of proceeds of crime, financing of terrorism and spread of weapons of mass destruction» asks a Belarusian legal entity to provide information about beneficial owners of a Belarusian company, and if «a company is founded by a legal entity, then … it is necessary to name beneficial owners of such a legal entity-founder».

In this article we’ll give a brief overview of the banks’ requirements and consequences of the client’s failure to fulfill such a request.

The above mentioned Law (http://pravo.by/document/?guid=12551&amp;p0=H11400165&amp;p1=1) defines the term «beneficial owner» in Article 1: «it is an individual who is the owner of property of the client, or owns not less than 10% of shares (ownership interests, equities) of the client-organization, or directly or indirectly (through third parties) has a right or is able to give binding instructions to the client, influence decisions the client takes or otherwise control its actions».

We specially draw your attention to the requirements of Article 8 of the Law as to the client identification procedure carried out by banks in respect of the clients-organizations. We quote the requirement as it stands: «Persons conducting financial transactions, when carrying out identification procedure in respect of the clients-organizations, … shall gather and record the following information about these organizations: …information about beneficial owners, and if as a result of actions to identify the client the beneficial owner is not reliably identified – information about the person that exercises functions of the sole executive body of the client-organization, or about the person being the head of its collective executive body …».

Add the provision of the Law stating that if the documents submitted for identification of the clients and other participants in financial transactions have no information about beneficial owners, oral information provided by participants in financial transaction shall be recorded. At the same time in accordance with part thirteen of Article 8 of the Law, when updating information the persons that conduct financial transactions have a right to request from the client or its representative to submit necessary documents and information. And Article 6 of the Law prescribes the banks’ obligation «to take reasonable measures, available in the circumstances concerned, to identify beneficial owners of the clients, sufficient to think that the person conducting financial transactions knows who is the beneficial owner of the client».

Note that the main purpose why the bank acquires information about beneficial owners of the client is to check, among other things, whether the stated persons are placed on the List of suspected terrorist organizations and individuals (http://www.kgb.by/ru/perechen-inf-ru/).

OUR CONCLUSIONS: If a Belarusian company for whatever reason cannot provide the bank with information about its beneficiaries or beneficiaries of its non-resident founder, in accordance with the Resolution of the Board of the National Bank of the Republic of Belarus dated 17 December 2014 № 783 the bank shall:
• carry out the verification procedure (check information about the client using public sources available on the Internet, commercial databases World-Check, Accuity, Dow Jones, and other sources) and if thereafter beneficiaries remain unidentified,
• consider a director of a Belarusian legal entity to be a beneficial owner.

If a director of a Belarusian legal entity is considered to be beneficial owner, information is inquired according to the standard list.